UPDATE: As one might expect, Kevin Greutert isn’t happy about this move. Check out his response at the end of the article.

This is a crazy development that, if true, sounds like stereotypical Hollywood business and absolutely terrible PR. A report has it that Lionsgate, irked by the fact that Paramount hired long-time Saw editor and recent Saw VI directorKevin Greutert to direct Paranormal Activity 2, has exercised an option on the filmmaker and will oblige him to direct Saw 3D. That’s right — the studio is, in essence, forcing Greutert to make the seventh Saw film so that he can’t help Paramount with the rival Paranormal Activity franchise.

Mike Fleming at Deadline Hollywood has the report, saying that the real prompt for this move was Paramount setting October 22 as the release date for Paranormal Activity 2. That’s the same date Lionsgate already held for Saw 3D. (Which we’ve seen referred to as Saw VII and Saw VII 3D; Fleming just calls it Saw 3D.) Last year the first Paranormal Activity opened against Saw VI and trounced it, handing Lionsgate the most dismal box office returns in the history of the series. This despite the fact that Greutert’s sequel seems to be better received among fans than other recent Saw films. Paranormal Activity was a juggernaut, thanks to skillful marketing.

The obvious question, then: did Greutert and his people really not see this coming? It’s a show of force by Lionsgate that was probably considered unlikely. But given that the Saw franchise represents a financial windfall for the studio and that Paramount was pretty brazen in hiring Greutert in the first place, what else was Lionsgate going to do? And what does Greutert do now, besides make the best Saw 3D he can? How can he possibly make a good movie if he feels press-ganged into the job?

As for Paramount, how much trouble can the studio really have finding another director to take on Paranormal Activity 2? Both films have to start basically right now — Greutert is said to have two weeks before beginning Saw 3D — but if you throw a rock in Hollywood you’ll hit six people willing to take PA2 with shorter notice than that. Original PA director Oren Peli is still finishing Area 51, so Paramount talking him back into the fold is probably out of the question.

Remember when horror films could just be fun? Oh, right, they were always commodities. But the money-grubbing business behind them rarely seemed this overt. At least this business push and pull might be more entertaining than either film…

UPDATE: If you read this and thought, “man, it must suck to be Kevin Greutert right now,” seems like you’re right. From his official site comes this post:

I’m in the middle of something really terrible right now, as anyone who has come to this site probably knows. While I fight for justice in this, the important thing is to avoid giving in to hatred and anger, because these emotions are life killers. Hopefully we will all arrive at an amicable solution. Thank you to everyone who is working with me on this. – Kevin